Why Ludwig von Mises Advocated for Liberal Nationalism Following WWI

In his criticism of imperialist policies in the service of socialism, labor-unionism, and the socialist war economy Ludwig von Mises could not restate many conventional arguments. He faced an unprecedented task in confronting the claim that imperialism can enhance the welfare of a nation. His pioneering analysis brilliantly confirmed Carl Menger’s insight that methodological individualism is able to analyze even large collective phenomena.

The main thesis in the first chapter of Nation, State, and Economy is that governments are incapable of improving the condition of the nations they rule. The reason is that the origin, emergence, growth, flowering, and decline of nations are subject to natural laws. The operation of these laws can be modified by government power but not abrogated, and any alteration will play out to the detriment of the nation. Mises proved his case by first analyzing nations in a free society and then turning to examine the impact of government power on their evolution. His practical conclusions called for the denationalization of the nation, or more precisely, for keeping government intervention as far as possible out of the life of language communities.

Following Scherer, Grimm, and Otto Bauer, Mises defined nations as language communities. He stressed that as far as democratic regimes are concerned, this definition is more than a mere convention. In democracies, communication—and thus language—is the primary political means. Language communities are therefore of critical political importance.12 What were the natural laws determining the rise and fall of language communities? Mises considered various objective factors determining their evolution.3 But his decisive considerations start from the fact that the membership in a language community is not something unalterable. Each human person can decide to leave his former nation and join another. In a free society, Mises stressed, nations would be purely voluntary associations:

No people and no part of a people shall be held against its will in a political association that it does not want. The totality of freedom-minded persons who are intent on forming a state appears as the political nation; patrie, Vaterland becomes the designation of the country they inhabit; patriot becomes a synonym of free-minded.4

Liberalism knows no conquests, no annexations; just as it is indifferent towards the state itself, so the problem of the size of the state is unimportant to it. It forces no one against his will into the structure of the state. Whoever wants to emigrate is not held back. When a part of the people of the state wants to drop out of the union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so. The nation as an organic entity can be neither increased nor reduced by changes in states; the world as a whole can neither win nor lose from them.5

What, then, determines individual membership in a language community? Neglecting objective factors such as the familial, historical, cultural, and political environments of the individual, Mises focused on the voluntary factor of assimilation. He asserted that, for practical reasons, language minorities tend to assimilate to the language majorities with whom they are affiliated through trade and other forms of social intercourse. Therefore, local minority nations ceteris paribus tend to disappear in the course of time. Mises stressed that this assimilation process was dependent on individual membership in certain social classes because social contacts were class-dependent. Minorities could preserve a separate existence for as long as spatial and social mobility were heavily controlled through custom and laws. Things changed radically when classical liberalism abolished such laws. The result was a dramatic migration—both physical and social—that disrupted the established balances between nations. Mises gave special attention to the impact of the increased spatial mobility, which by the late nineteenth century had already reached a massive scale. These migrations constantly produced areas of mixed cultures, threatening the established groups with their disappearance through assimilation, thus prompting political rivalry and conflict.6

Mises did not believe these movements could be stopped because they reflected the self-interest of the migrants.7 What could be done, then, to alleviate the national conflicts that were the necessary consequence of those migrations? The only viable solution, Mises argued, was to reduce the role of the state within society, because the political conflicts between nationalities primarily concerned control of the state apparatus:

Of course, the struggle of nationalities over the state and government cannot disappear completely from polyglot territories. But it will lose sharpness to the extent that the functions of the state are restricted and the freedom of the individual is extended. Whoever wishes peace among peoples must fight statism.8

The way to eternal peace does not lead through strengthening state and central power, as socialism strives for. The greater the scope the state claims in the life of the individual and the more important politics becomes for him, the more areas of friction are thereby created in territories with mixed population. Limiting state power to a minimum, as liberalism sought, would considerably soften the antagonisms between different nations that live side by side in the same territory. The only true national autonomy is the freedom of the individual against the state and society. The “statification” of life and of the economy leads with necessity to the struggle of nations.9

Mises offered here a radical alternative to the prevalent models for solving national conflicts. Austria had the longest experience with national struggles within a common state, and its intellectual, political, and institutional history was therefore richer than that of any other country in analyzing and solving this problem.10 For example, the constitution of the Austrian great-dukedom of Siebenbürgen, which existed until 1848, provided for separate parliaments and administrations for Saxons (Germans), Hungarians, and Szeklers. Affairs of general interest were dealt with in a common parliament, which debated in Latin. The ugly side of this otherwise charming arrangement was that the Romanians, who were in the numerical majority in Siebenbürgen, had no representation.11 During the revolution of 1848, a promising approach was developed to overcome this and similar problems. On March 4, 1849 the deputies of the constitutive assembly (which had by then moved to the city of Kremsier) voted on the proposed Kremsier Constitution, the point of which was to abolish the old territorial units composing the empire (the “kingdoms and lands”) and to replace them with administrative counties, the boundaries of which would be drawn according to the national affiliation of the inhabitants. The German nationalists reacted on the very same day with a counter-proposal presented by Prince Schwarzenberg. From then on, the principle of equal legal treatment of the different languages was on the defensive and finally defeated.12

The failure of the revolution prevented the practical application of the Kremsier Constitution, but the idea lived on, especially in the various programs of the social-democratic party. At their 1899 convention in Brünn, the social democrats decided to tackle the problem of national conflicts by creating parallel state organizations along national lines. This approach, they believed, would ensure “national autonomy” to each nation and thus prevent struggles between the nations once and for all. To serve as a model for the rest of Austria, they transformed their own party, creating parallel national organizations.13 In the following years, its intellectual leaders, Karl Renner and young Otto Bauer, revived and refined and popularized the idea of replacing the old territorial units with new national counties.14 It turned out however, that nationalistic passions were too strong to be tamed even by the spirit of socialist solidarity. After the introduction of universal suffrage in 1907, the party quickly dissolved into national organizations and lost all impact on Austrian politics. With hindsight, and with the help of Mises’s theory, we can identify the root cause of these failures. All of his predecessors had tried to use government to solve the problem of national struggles. None of them recognized (or admitted) that coercive association—the sine qua non of the state—was the very source of national conflicts. A different government scheme cannot possibly be a solution for a conflict caused by the nature of government itself.

But how far could one go in keeping the state out of society? How far should one go? Mises argued that the only limits are of a technical-administrative nature:

The size of a state’s territory...does not matter. It is another question whether a state is viable when its population is small. Now, it is to be noted that the costs of many state activities are greater in small states than in large ones. The dwarf states, of which we still have a number in Europe, like Liechtenstein, Andorra, and Monaco, can organize their court systems by levels of jurisdiction, for example, only if they link up with a neighboring state. It is clear that it would be financially quite impossible for such a state to set up as comprehensive a court system as that which a larger state makes available to its citizens, for example, by establishing courts of appeal.15

Hence, Mises advocated a complete liberalization of society. There should be no political limits to this process. And it would in practice be limited only by banal technical considerations. In other words, Mises welcomed the unhampered competition among national territories, which in a free “inter-national” society would be a peaceful competition between language-based cultures, in which each individual, through his assimilation choices, would determine the fate of the various language communities. Mises sensed that the only dignified attitude toward the reality of cultural competition was national self-confidence:

A nation that believes in itself and its future, a nation that means to stress the sure feeling that its members are bound to one another not merely by accident of birth but also by the common possession of a culture that is valuable above all to each of them, would necessarily be able to remain unperturbed when it saw individual persons shift to other nations. A people conscious of its own worth would refrain from forcibly detaining those who wanted to move away and from forcibly incorporating into the national community those who were not joining it of their free will. To let the attractive force of its own culture prove itself in free competition with other peoples— that alone is worthy of a proud nation, that alone would be true national and cultural policy. The means of power and of political rule were in no way necessary for that.16

Mises argued not only that political rule is unnecessary to improve the condition of a nation, but also that it is incapable of doing so. In a free society people constantly migrate to those locations offering the most favorable conditions for production. Every individual has an incentive to migrate from a relatively poor area to a relatively rich area. These migrations would continue until wage rates and interest rates are equal in all locations.17 In a liberalized world, therefore, there would be a tendency away from differences in income. There would eventually be no rich or poor countries in the world. There would only be countries that are more densely populated, and other countries that are less so.

Mises pointed out that government intervention does not change anything about people’s motives to migrate from relatively poor areas into relatively rich ones. On the contrary, if government tries to keep its people in the land through a system of protective tariffs, it only exacerbates the problem. Protective tariffs might prevent the emigration of those who would be most affected by foreign competition, but they reduce the per capita income of all the other members of society, further multiplying the incentives for emigration. Again, a dispassionate suitability analysis comes out against government intervention. Mises concluded that the only rational approach in matters of political nationalism was to follow classical-liberal precepts: shrink the state, open borders, and face the cultural competition of international migrations.

2. Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f.

3. For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff.

17. With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff.

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